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Mar 09

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Context is Key in Judging RIM’s Corporate Name Change

On January 30, Research in Motion (RIM), the maker of BlackBerry mobile devices, announced that it had changed its corporate name to “BlackBerry.” Since the then, several news sources judged the success of the name change based on the subsequent price movement of the newly rebranded “BBRY” shares. Slate reports, for example, that “shareholders don’t seem overly impressed with Research in Motion’s new moniker at this point…BlackBerry’s stock is down 12 percent after Wednesday’s announcement.” Five days later and in contrast to Slate’s article, Business Insider published an article titled “BlackBerry Finds Name Change Worth $1B” based on the share price appreciation following the announcement.

How can these two media outlets see the same activity as having such different results?  The main problem occurs because of timing.  Slate believed that price movements in the following trading day reflected the market’s feelings towards the new name. Business Insider, in contrast, decided that 5 days’ worth of trading was the relevant indication period. Who’s right?

The answer in this case is neither.  Both organizations failed to recognize that on the same day that RIM announced its name change, it also unveiled its new operating system (OS 10) and two new smartphones. Because (i) the name change, (ii) a new OS, and (iii) two new phones were announced simultaneously, the movement in share price cannot be attributed to the name change only. The market was probably more concerned with the unveiled products’ quality and appeal, rather than the name change.  Both Slate and Business Insider failed to consider these important simultaneous events, or perform any other contextual evaluation of why the stock price may have moved.

 

About the author

Benjamin Bohr

Benjamin is a manager at Fulcrum Financial Inquiry. He specializes in statistics and data analysis for use in high-stakes litigation, business valuations, and other financial matters.

Permanent link to this article: http://betweenthenumbers.net/2013/03/context-is-key-in-judging-rims-corporate-name-change/

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